Britain, France and Germany finished over the weekend a first draft of a resolution on Iran's nuclear program to present to the UN watchdog International Atomic Energy Agency's (IAEA) 35-nation board of governors when it meets in Vienna on Thursday, diplomats said.

The board will decide whether or not to take Iran before the UN Security Council for possible sanctions for a nuclear program which the United States charges is devoted to secretly developing nuclear weapons.

Iran claims its nuclear program, parts of which it long failed to disclose, is a strictly peaceful effort to produce electricity. It has agreed to a suspension as of Monday of all its uranium enrichment activities, including making uranium gas, as a confidence-building measure in order to avoid being taken to the Security Council.

But diplomats had told AFP on Friday that Iran was producing the uranium feedstuff that is the first step in the enrichment process, only days before Monday's ban.

Enriched uranium, made by spinning uranium gas in what can be cascades of thousands of centrifuges, can be fuel for nuclear reactors or the raw explosive material for atomic bombs.

US President George W. Bush sharply warned Iran on Saturday about reports that the Islamic republic has accelerated production of uranium material that could be used to make nuclear weapons.

"This is a very serious matter, the world knows it's a serious matter, and we're working together to solve this matter," Bush said.

"It's very important for the Iranian government to hear that we are concerned about their desires, and we're concerned about reports that show that prior to a certain international meeting, they're willing to speed up processing of materials that could lead to a nuclear weapon," Bush said.

The IAEA will be verifying Iran's enrichment suspension. Diplomats in Vienna said adhering to the suspension will be a key test for Iran.

The British-French-German draft resolution takes into account Iran's many past failures to report sensitive nuclear activities which were documented in a report this month to the IAEA board by the agency's director-general Mohamed ElBaradei, a diplomat close to preparations for the IAEA meeting told AFP.

ElBaradei said that after a two-year investigation the agency had found no proof of a secret Iranian nuclear weapons program but could not yet conclude there was no covert activity.

The diplomat said that besides looking back at the almost two decades of Iran's hiding its nuclear program, the resolution will also "reflect what is in the Paris agreement," in which Iran agreed to suspend its enrichment activities.

The United States would like to see a so-called "trigger mechanism" that would say that if Iran fails to honor the enrichment suspension, the matter would automatically go to the Security Council.

The diplomat said the text "has some sort of trigger language" but that it was "indirect."

"The Iranians will see it and will not be surprised," he said.

US diplomats have in the past pushed for tough, direct language against Iran but have had to compromise as the European trio stress constructive engagement rather than confrontation with the Islamic Republic.

Under IAEA investigation since February 2003, Iran agreed in October 2003 to suspend the actual enrichment of uranium.

Under international pressure for continuing to make centrifuges, Iran agreed in February 2004 to suspend such support activities, but it said this did not include converting yellowcake into uranium gas, which is the first step in enrichment.

Such conversion, however, is also to be suspended in the enrichment halt scheduled for Monday.

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